If an attempt to extend property leasehold periods to 50 years is successful, more developers will choose this alternative to make new projects more affordable for Thai buyers.

It will also help to attract new investment, reduce nominee issues and increase demand for property ownership.

Patima Jeerapaet, managing director of property consultant Colliers International Thailand, says the country should be ready for the launch in 2015 of the Asean Economic Community, which will create a major change and a great opportunity for Thailand. In the property sector, there will be huge movement and new investment across the region. An extension of the leasehold period would promote overseas investment in Thailand.

“If we are not ready for it, how can we compete with others?,” Mr Patima says. “An extension of the leasehold period will help boost the property market as a longer term is more secure than a shorter one.”

Tomorrow Mr Patima will meet Kiat Sittheeamorn, president of the Thailand Trade Representative Office, to discuss a proposal to amend the definitions of zones in the Hire of Immovable Property for Commerce and Industry Act.

“If our proposal is approved, it will become a ministerial regulation under the act,” he says.

Wittaya Luengsukcharoen, a partner at international law firm Baker & McKenzie, says an extension in leasehold property ownership to 50 years would reduce the number of nominees holding a property for foreigners.

“The current leasehold contract with 30 years is not attractive among some foreign buyers as an option to renew is not secure,” he says.

Yuthachai Charanachitta, president & CEO of Amari Estates Co, a property arm owned by the Charanachitta family, agrees with the attempt to extend the leasehold period, saying it would increase interest in property ownership among both local and foreign buyers.

“In some prime locations, land plots are scarce, pushing selling prices for a new residential unit so high. Leasehold helps reduce the ownership price to be more affordable, but a 30-year period is less attractive,” he says.

Prices for a 30-year leasehold unit may rise by 30-50% if the period can be extended to 50 years at one registration, says Mr Yuthachai, the eldest son of Nijaporn Charanachitta, Thailand’s 28th-richest person last year ranked by Forbes magazine and the second-largest shareholder of construction firm Italian-Thai.

The project will be located on a beachfront, hillside 18-rai site on a 70-rai plot the company has at one end of the beach. It will comprise 10 villas and 190 condominium units.

Unit prices for a villa and a condominium unit will be 30-50 million baht and 8-10 million baht, respectively, under a 30-year lease contract with a renewal option and a leaseback programme.

“Thai people’s perspective on leasehold property will improve if the project is supported by a hotel management service,” Mr Yuthachai says. “Selling prices for freehold may skyrocket to 100 million baht for a villa [at the Phuket project], which would be more difficult for Thais to afford.”

Amari Estates also plans to launch two more leasehold projects each worth 1 billion baht in Phuket and Pattaya next year.

The Phuket project will comprise a condominium and a hotel on 15 rai of Nai Han beach, while the Pattaya project will be on 10 rai of Wong Amat beach.

Nationalities of condominium buyers in the Thai city of Pattaya have changed dramatically since 2010 – from the Europeans and Scandinavians working in the Asia Pacific region to local Thais and expatriates who reside in Bangkok, according to the latest Pattaya Market Report published by Knight Frank Thailand.

The company’s Managing Director Phanom Kanjanathiemthao said that in the past, condominium projects in Pattaya were attracting buyers from the UK, Sweden, Norway, and Finland – many of whom were working in Asian countries such as Hong Kong, Singapore and China. However since 2010, the make-up of buyers has changed to Thais and local expatriates from Russia, Germany, the Middle East, Australia and India. Most of these expatriates live in Bangkok.

“Most Indians buy condominiums for investment, while the Thais tend to buy as a holiday home because Pattaya is quite close to Bangkok. I can say that Thai buyers who buy condos in Pattaya prefer a similar lifestyle as in Bangkok. This is quite different from those who choose to buy condos in Hua Hin,” said Phanom.

According to the research, the number of newly-launched condominiums in Pattaya last year was 2,887 units. The majority of sea-view projects was developed in the Jomtien area.

In terms of unit types, studios and one-bedroom units seemed to be popular, while projects launched before 2009 offered larger units, with two-bedroom units representing 43 per cent of total supply, followed by the one- and three-bedroom units at 30 per cent and 20 per cent respectively.

“The product trends in Pattaya are quite similar to Bangkok; offering a smaller unit size to decrease the selling price,” said Phanom. “From our research, the best selling unit types are one-bedrooms priced between THB3 million (US$97,810) and THB5 million (US$163,020), and two-bedrooms priced between THB6 million (US$195,605) and THB7 million (US$228,205). And of course, people always go for the sea-view units.”

Thailand’s property market is considered one of the major business sectors in Thailand which is inevitably on the boom with the economical development of the country.

Thailand has passed its turbulences in year 2010 which is considered one of the most difficult years in the Thai history as well as for businesses in all sectors. Surprisingly, despite the political turbulence, many huge deals were closed during 2010. In fact, some property investment sales did hit the highest record. This is an indication of high confidence in the property sector as investing in a property is a long term investment.

The property market is mainly categorized into 5 different sectors which includes: industrial, commercial, residential, retail and hospitality. But when property is talked or discussed about, the general public will most likely perceive on the residential market or condominiums.

So, what about the property market in Thailand? Will prices go up in 2011? Is there really scarcity of land? Is it equilibrium for the property market and what will happen in 2011?

Dr. Patima Jeerapaet, Managing Director of Colliers International Thailand and Chairman of the Property Committee of the Thai Swedish Chamber of Commerce, shares his deep knowledge of the sector and his predictions of the market development this year.

We have so many questions on our minds. There is no doubt that prices of property along the BTS or MRT lines will increase continuously because of the limited amount of land and the high demand. This is a scarcity amongst developers because these are considered the prime locations. However in the future, should these lines expand, I believe that land along the extended lines would then become more attractive for developers.

For year 2011 – the right defined statement would be “Certainty is uncertainty”. We should be ready to surf the changing wave if there is any!! We should plan for uncertainty and be ready to apply all strategies for each challenge and each circumstance.

Judging from the Q4, 2010, I would view the Thai property marketing in each sector for below for 2011.

Industrial
Many key industrial estate developers were able to achieve their targets in 2010. The overall industrial market seemed to have improved and growth is expected by 10% in 2011, especially in manufacturing, automobile and parts, electronics and IT businesses. There are also more demand from foreign and local manufacturers for the expansion of industrial estates. The many concern for the industrial sector would be Environment Impact Assessment (EIA) and Health Impact Assessment (HIA).

Commercial
The office market has improved slightly especially for Grade B office buildings because of the extended mass transit. Many office buildings outside the CBD seem to attract interest from Tenants as well. Within the CBD, many office buildings are adopting the trend of renovating their office buildings with a more modern look to retain existing tenants as well as attract new tenants.
Where Regional Operating Headquarter (ROH) is concerned, no clear movement can be seen as yet but can expect to see results with 2011. This year should be a brighter year for the office market.

Residential
The overall residential market in 2010 mainly condominium was on the rise. In 2011, this will rather be stable. Condominium prices ranging between 80,000 – 120,000 baht per square meter will still be available within the city while on the outskirts prices would range between 50,000 – 75,000 baht per square meter. Upper-end condominiums for foreign investment have slowed down because of the strong Thai currency there are still some investors who look for quality products at bargained prices. This year we can expect for developers to gear their interest to building town houses or detached houses along the new mass transit extension lines.

Retail
The retail market has shown continuous improvement. Local demand continue to grow strongly but for tourists, this might be a little hesitant because of the strong Thai currency. There are many newly launched retail projects, for example supporting retail space in residential projects and community malls along the new mass transit lines.

Many big retailers and department stores are also adopting the trend to renovating / face lift / re-branding their stores to attract shoppers both in the capital and upcountry. There are also a number of new shopping centers which is likely to be completed in 2011.

Hospitality
For hotels industry in 2011, we can expect that there will be approximately 1,662 new rooms for the upper scale and luxury hotel. Hotel investors look for long term investment. Please do not perceive this to be an oversupply because the expected payback period for hotel investors in between 10 – 12 years. Hotel investors invest with an objective for capital gain in the future. The low labor costs, low material costs and low import cost since 2010 are striving hotel investors to seize the opportunity for construction.

Like other businesses, the property market also has its life cycle. Certain properties within the main business and shopping areas are also starting to rejuvenate their assets such as properties within the Sam Yan area of Chulalongkorn University properties, Bangkok Bazaar and Langsuan of Crown Property Bureau, some old shop house projects along Sukhumvit Roads and other main roads.

Agricultural property sector
Nevertheless, there is another sector that the locals should look into as another choice of property investment. This is the agricultural sector which is rather sensitive, complex and controversial with regards to property rights and cultural rights. This is an opportunity for the local property investors and is a way for life’s sustainability as well.

Another major change in the Thai property market we look towards in 2011, is the possibility of leasehold extension that will encourage and assist Thai developers, Thai investors as well as foreign investors in their property investment. This will also bring in foreign direct investment into the country.

Asian Economic Community in 2015
Looking a little bit further, the major change in 2015 would be the Asian Economic Community (AEC) which will positively impact the property market in all sectors as well as transportation and logistics. The high speed trains from China and the roads connecting countries will hugely benefit Thailand. AEC will open up businesses amongst the Asian countries. Geographically with Thailand in the center of many countries, Thailand will have a larger distribution channel. The public may be scared of over supply of condominiums but once AEC is introduced this will no longer be on ‘over supply’ as we will have more demand for residential. There will be a higher possibility and opportunities for Commercial, Industrial, Retail and Hospitality sectors as well..

2010 represented a record number of launches, dwarfing the figure for 2009 according to the latest Bangkok condominium market report from Colliers International Thailand (CIT).

In Q4 2010 alone, over 20,000 units were launched for the whole of Bangkok, including the suburbs, while a total of newly launched condominiums for the whole of 2010 was 60,000.

It has reached the point that there are concerns of a supply bubble and recently the Bank of Thailand introduced a 90 per cent loan to value curb in order to cool the market.

According to the company’s senior research manager Antony Picon, these concerns are likely to be overblown. “Although 2010 was quite dramatic in comparison to recent years it simply means that developers are tapping into income levels largely ignored in the past and for 2011 this is likely to continue”, he said.

However, he did point out that this year would see a transition from boom to consolidation. He stated that take up has been slowing to some extent as buyers shop around a bit more to find the right unit and the days of selling out new projects in one day are largely behind us but launches are likely to lessen over the coming quarters.

“After all, developers also have to concentrate on building what they launched”, Picon added.

Meanwhile, CIT’s managing director Patima Jeerapaet believed that the market structure would remain strong this year. “ Large listed household names continue to dominate the market but smaller non-listed developers are dipping their toes into the market with smaller scale products and this makes for a healthy, competitive market” he said.

Patima also remains bullish for the condominium market. “ Bangkok’s population will continue to grow and incomes will also rise so there is plenty of future demand for the market to expand if at a lower pace than 2010”, he stressed.

While mass transit lines are a major factor in the condominium story, the picture is not all rosy. The latest research also indicated that there would be a good price premium as well as robust take up with projects located within 200 metres of a station. However after this distance the pricing benefit weakens and take up can be lower, especially within a 200-500 metre distance.

Picon also suggested that a paratransit service would become essential. He said: “Once you start to move more than 200 metres from a station then there is a greater likelihood of having to use some additional mode of transport.”

He also suggested to develop mass transit stations in the future as retail/paratransit hubs that provide efficient access from the condominiums to and from each station using regular feeder bus services or even a light monorail. “The retail component could serve as a community mall serving the needs of residences connected by the feeder systems,” he added.

Hope of passing a land and building tax bill in Thailand will have to be postponed until the next government, according to a report in the Bangkok Post newspaper.

Finance minister Korn Chatikavanij had vowed to pass the law since the beginning of the Abhisit Vejjajiva administration, but he recently admitted that his target to start tax collection on land and property by June could not be achieved.

The bill is designed to reduce social inequality among Thais as 10 per cent of the population own more than 100 rai of land each while 90 per cent own less than one rai. Currently, the law is reviewed by the Council of State.

According to Somchai Jitsuchon, research director of macroeconomic development and income distribution for the Thailand Development and Research Institute, a land tax could increase state revenue by THB100 billion (US$3.28 billion) a year. But he pointed that incumbents might not want to risk losing the votes and money of influential landlords.

He said: “If the government could collect tax properly by including people living outside the tax system, it could increase revenue without needing to raise tax rates.”

The economic crisis has shaken the West’s confidence and the fact that the economies of China and India are growing by 10% and 9% respectively, compared with 3% for America and 2% for Europe, goes somewhere to demonstrate that shift happens.

At the end of last year, The Economist published an article “Now hope is on the move”, saying that in a recent poll “some 87% of Chinese, 50% of Brazilians and 45% of Indians think their country is going in the right direction, whereas 31% of Britons, 30% of Americans and 26% of the French do. Companies, meanwhile, are investing in ‘emerging markets’ and sidelining the developed world. ‘Go east, young man’ looks set to become the rallying cry of the 21st century.”
Bangkok building

It is also likely that Thailand will continue moving forward with the ‘emerging markets’ of China and India likely to expand. This could lead to their investing in attractive markets such as Thailand.

It was suggested by CBRE that faster resurgence than in 1997 crisis is expected this year because of “rapid global action and good local financial health” and predicted back then that “Thailand’s property market is expected to recover” in 2011″.

“We believe that this recovery cycle will be faster than that after the 1997 financial crisis because global leaders such as the US, the UK, Europe, Japan and China have launched measures to solve the problem. Meanwhile, Thailand’s property developers and finance firms are healthier, financially, than they were in 1997.”

There are always some that advocate the resurgence of the property market this year but caution needs to be added into the mix: the global property bust that led the world into recession did start to lift in 2010, with property prices up in Britain and stabilised in America.

By late 2010 output and employment was up in most “mature” economies but Europe has been humbled by its sovereign-debt crisis, which is undermining the euro.

So we can’t be altogether sanguine about the recovery in property markets this year as some might have us believe. One of the major problems facing Bangkok is the continuing political uncertainty and the oversupply of rentable space relative to demand.

Surprisingly, though, Thailand Property Market concludes that Thailand’s economic fundamentals are strong as the country “continues to be an attractive place to do business” with the baht and the stock market at an all-time high.

Jones Lang LaSalle concludes in its report that this year is expected to see a much greater divergence in real estate activity and performance: global direct commercial real estate investment volumes rising by 25-35% on 2010 levels.

Asia Pacific will lead the upswing in leasing markets, ahead of Europe and North America; prime property will continue to outperform secondary; and that the domestic corporate sector will come to the fore in Asia Pacific, particularly in India and China.

They also predict that “robust competition for trophy assets in the world’s high order business hubs will continue to push up capital values, with London, Paris and Moscow offices expected to achieve double-digit prime capital appreciation in 2011″, while in the major Asia Pacific cities,

“prices may be forced up beyond usual risk return capitalisation rates, particularly when compared to levels that can be achieved in more mature markets such as London.”

Looking at the year ahead, we feel that in attractive investment opportunities to take advantage of selective value-add and opportunistic strategies there is every reason for optimism in US real estate markets for 2011 in spite of the fact that quantitative easing and pressure on expanding government budget deficits.

This could see the economic growth trajectory and outlook to be one of maintaining parity with caution and opportunity. It is also likely that Thailand will continue moving forward with the ‘emerging markets’ of China and India likely to expand. This could lead to their investing in attractive markets such as Thailand.

Soho Properties is a leading property agent in condos for rent in Bangkok, and offer a first-class service for all property-related needs.

The director of the Phuket Land Office in Thailand has implored local people not to sell their land to non-islanders.

According to local media reports, director Paitoon Lertkrai made his comments outside a Ministry of the Interior seminar at the Royal Phuket City Hotel at the end of December.

”I would like to tell Phuket people, don’t sell your land to foreigners. Keep it for sale to Phuket people,” he said.

Houses on Phuket, Thailand. A large proportion of properties on the island have been bought up by non-islanders Photo: imagebroker / Alamy

Mr Lertkrai later told Thai newspaper The Phuket Gazette that he was concerned not only by the growing number of foreign buyers taking interest in the island, but the number of Thais and Thai companies from other regions.

“I do not mean just people from other countries, I mean anyone not from Phuket,” he said.

“I want Phuket people to keep their land for their children… and their children’s children. If they sell it all, where will their children live?”

Over the past few decades, the idyllic island off Thailand’s south-west coast has become increasingly popular with foreign buyers, making Phuket one of the country’s most valuable property markets.

Though real estate sales to foreigners dropped drastically during the economic crisis in 2008 and 2009, many agencies have reported increased interest from foreign buyers during the last year. Property development firm Seacon has estimated that sales to foreign buyers could increase by up to 25 per cent by the end of 2011.

Richard Lusted of real estate agency Siam Real Estate said however that it was too soon to tell what would happen to the Phuket market in 2011. “In our opinion in Phuket the market has been flat for residential sales for 2009-2010. We are now seeing an upturn in 2011, however too early to give any indicators of percentage rise over the previous two years.”

Nick Thatcher, a British expat who runs the property agency Thai-Real, said Phuket’s popularity with foreigners was due to its combination of relatively low prices with high-quality properties. “Development is far ahead of other areas. If you are used to living in a very expensive apartment in central London and for a fraction of the price you can get a better property with sunset ocean views and a beach down the road it’s quite an easy decision for some.”

He added that Mr Lertkrai’s comments were only the latest in a series of attempts by authorities to convince locals to not sell to foreigners. “It’s always been the way the government would would like it to stay. But with so much money arriving from overseas it’s hard to convince a land owner to sell at a lower price to a local.”

Real estate sales to foreigners in Phuket are expected to grow 25 per cent this year to 5 billion baht, according to property development firm Seacon.

Nevertheless, sales are likely to remain at least 50 per cent lower than during the boom years of 2006 and 2007, when foreign sales came in at 10 to 12bn baht each year.

Piya Sosothikul, executive director of Seacon, said property sales to foreigners in Phuket were worth about 4bn baht last year, up around 25 per cent on 2009. Trends are improving, with sales expected to reach 5bn this year, he said.

Kamala is home to many high-end development projects. Photo by Jim Welch

The market has still not fully recovered from its peak before the 2008 financial crisis, however. The major reason for continued weak sales is the economic situation in Europe, particularly the UK, where large numbers of customers came from in the past, he said.

The strength of the baht is also a factor. The appreciation of the currency means property is becoming more expensive for foreign buyers, he said.

Another factor is lack of confidence, Mr Piya added.

There are many projects on the island that people have invested in that have been delayed or remain unfinished, he said.

The foreign property market in Phuket is Thailand’s second-largest after Bangkok. Rounding out the top seven are Pattaya, Chiang Mai, Samui, Hua Hin and Krabi, respectively, he said.

Mr Piya said there were 147 property projects under development in Phuket.

Of these, 23 would be considered “super premium”, meaning they comprise villas worth at least US$2 million each. Most of them were found in Surin, Kamala and west coast areas overlooking the sea.

There are 96 projects with units costing between 5 to 60 million baht each, which are spread all over the island, Mr Piya said. There are also 28 condominium projects, he added.

Quality Houses Plc (QH) is aiming for 15-20% growth this year, planning to launch 22 new housing projects worth a combined 28.6 billion baht, including developments in new locations including Rayong and Cha-am.

However, CEO Rutt Phanijphand admits he is keeping a wary eye on political developments. Like many businesses, the developer is concerned that the coming election campaign could be rough and even violent, given the depth of passions evident over the past year.

Rising interest rates and the possibility of further attempts by the Bank of Thailand to curb property lending to cool the market are also concerns.

“We are concerned about the negative factors and more cautious in launching new projects,” said Mr Rutt. “If we are not confident, we will slow down some new projects.”

He expects the central bank to increase its benchmark interest rate, currently 2%, by 50 to 100 basis points over the coming year.

Many consumers are also worried about curbs on home loans, which took effect on Jan 1. Banks will be able to lend no more than 90% of the value of condominiums priced up to 10 million baht, and 95% in the case of low-rise housing. Financing of 100% has been common in the market at a time of intense competition to attract borrowers.

External factors, which could also affect the Thai economy, exports and confidence, include ongoing debt problems in Europe and China’s efforts to cool its economy by pushing up interest rates.

QH in 2010 missed its 25% growth target mainly because of the political crisis from March to May, which hurt tourism and its serviced apartment business. Homebuyers also were reluctant to make commitments in the first half.

However, its 2010 performance was still better than in 2009 with growth of 15% in revenue from 11 billion to 13 billion, helped by the property tax incentives that expired in June 2010.

Revenue of 16 billion baht or growth of 15-20% is QH’s target for 2011. It has a budget of 5 billion baht to buy new plots of land, up from 4 billion in 2010.

The 22 planned new projects in 2011 will be much higher than the 14 developments worth 20 billion baht that it launched last year.

The new projects will include 16 detached-house estates, two townhouse projects and four condominiums. Some will be in new locations where QH has not had a presence, such as Ring Road-On Nut, Ramkhamhaeng and Rama II.

Besides new locations in Bangkok, new provincial locations will include Rayong, where QH will develop 182 villa-style units worth 700 million baht on a beachfront site with unit prices of around 3 million baht. To be launched in the first quarter, it would focus on Thai buyers seeking resort homes.

In Phetchaburi, it plans a resort-style condominium on Cha-am Beach with 101 units worth 700 million baht, to be launched by the end of 2011.

“They [two locations] are new markets that are interesting for a pilot project,” says Mr Rutt. “Large developers rarely enter these markets. Most of the projects there are developed by local firms.”

QH also plans a condominium worth 400 million baht on Chang Puak Road in Chiang Mai. Target buyers will be people working in Chiang Mai and parents seeking units for children studying in the province.

In Bangkok, Nonsi Road and Kaset-Navamin Road will be the locations of two lower-end projects worth a combined 3.88 billion baht under its subsidiary Confidence Co Ltd.

It will also launch one condominium under the Casa brand worth 1.2 billion baht in Huai Khwang at unit prices of 2-3 million baht.

QH is also in talks to buy a plot in the Asok area where it plans a condominium worth 1.7 billion baht with unit prices starting 110,000 baht per square metre, to be launched by the end of 2011.

Currently, the company has housing inventory worth around 4 billion baht, half of it condominiums in the Lang Suan area and the rest single houses and townhouses.

QH shares closed on Thursday on the SET at 2.10 baht, down four satang, in trade worth 86.47 million baht.

Hua Hin’s property market is shown signs of recovery with new project launches and increased sales on existing projects.

As reported in the Bangkok Post, the market slowed down due to global economic recession in late 2008. Although demands from Thai buyers seeking holiday homes remained active, foreign demand seemed to disappear.

Engel & Völkers Thailand has also taken over the sale of 48 units at the Malibu Kao Tao in Hua Hin.

Duangjai Kraus, executive chairman of property consultant Engel & Völkers Thailand, said that foreign buyers have come back but in smaller numbers than pre-2008. She said: “They are interested in purchasing a unit in this resort destination but are reducing their budget due to the economy and the strengthening baht.”

Engel & Völkers Thailand currently acts as a sole agent for The Sanctuary Hua Hin condominium project in the Khao Takiab area, where 40 per cent of its 102 units have been sold since the launch in mid-November. Prices range from THB60,000-80,000 (US$1,999-2,666) psm or THB2-10 million (US$66,645-333,222) per unit.

In addition, the company has launched Hua Hin Ville on a 10-rai site in the town centre. The project comprises 90 residential units priced at THB6-9 million (US$199,987-299,996).

It has also taken over the sale of 48 units at the Malibu Kao Tao Hua Hin project, priced at THB76,000-93,000 (US$2,533-3,100) psm or THB7-30 million (US$233,299-999,338) per unit.

According to Duangjai, Engel & Völkers plans early next year to join a partner in the United States and introduce residential units in Florida, California and New York to Thai buyers. These are the three favourite locations in the US for Thais.

She said: “If one US dollar is 28 to 29 baht, it will be a good chance to tap this market.”